Global equities and fixed income markets posted positive returns in November, driven by the strong performance of US share markets following Donald Trump's decisive victory in the presidential election. This victory boosted market optimism about deregulation, tax cuts and favourable business conditions. In the fixed income space, bond yields initially rose at the prospect of increased use of tariffs under the Trump administration. However, this was followed by a sharp decline after Trump announced his pick for Treasury Secretary who sees tariffs as a negotiation tool rather than a means to an end. Commodities (such as raw materials or primary agricultural products) returned slightly positive results, although oil prices were down, and gold experienced its worst month of the year as uncertainty decreased post-election.

New Zealand bonds posted positive returns in November as the Reserve Bank of New Zealand (RBNZ) delivered another cut to the Official Cash Rate (OCR). However, the global bond market outperformed local bonds this month as yields fell more dramatically in other parts of the world. The Bloomberg NZ Bond Composite 0+ Year Index recorded a 0.6% return.

The New Zealand Dollar (NZD) held up well against the United States dollar (USD) in November, declining only slightly by 0.6% during the month. Meanwhile, the NZD performed well against the Euro, rising by 2.2%, with the escalation of tensions in Ukraine and a rising political risk premium being major factors. Against the Japanese Yen (JPY), the NZD fell by 2.0%. The JPY was the strongest of the major currencies in November amid heightened expectations of a rate hike in December by the Bank of Japan.

Significant developments for November:

• Following Donald Trump’s landslide victory in the US election on November 5th, equity markets and the US dollar rallied, reflecting a generally positive market sentiment in response to the election results.
• The conflict between Ukraine and Russia escalated mid-month as Ukraine launched Western-supplied missiles into Russia. In response, Russia fired missiles into Ukraine that were capable of carrying nuclear warheads to send a warning message.
• On the 27th of November, the RBNZ delivered a third consecutive cut to the OCR, reducing it by another 50 basis points to 4.25%. The RBNZ's commentary indicated that CPI and core inflation are converging on the midpoint of the 1-3% target range, thereby increasing confidence to ease monetary policy.